July 29, 2011

Click here as zerohedge reports that the Primary Dealers have been called to the NY Fed for an emergency meeting (noon today).

Check back with zerohedge for more news throughout the day. This day is shaping up to be very interesting. Gold is up. And for some reason this morning, CNBC is running the gold price with the stock indexes on the lower left corner. I thought the price of gold didn’t matter?

Greg Hunter, our own usawatchdog.com, has nailed the true problem once again. The debt ceiling can be raised, but a credit downgrade is the beginning of the end. The interest on our debt is killing us now (requiring us to raise the debt ceiling to cover ongoing expenses and interest), imagine how more quickly we will die as the rates are increased due to risk.

The more money that the US must pay out in interest, the less money available for all other government expenses from social security to the wars. That is the shift from a too-much-debt problem to a cash flow problem.

In the latest report from Shadowstats.com, economist John Williams said, “If I were to script a scenario as to how the United States quickly could debase the U.S. dollar with maximum impact, impairing the dollar’s reserve status and dwindling global credibility, and accelerating the movement towards a U.S. hyperinflation, it would be extremely difficult to come up with a more destructive course of action than what already is taking place in Washington, D.C. The chances of a U.S. debt default remain nil, but risk of a U.S. sovereign credit rating downgrade—though small—is increasing. ..”

You can’t control the outcome in Washington DC, so you will have to protect your savings, future, and investments yourself.

July 28, 2011

Click here for Martin Armstrong’s latest letter dated July 27, 2011, entitled Lack of Formal Education Part 2 (10 pages). Apparently his last letter regarding the lack of education in FOREX and world economics hit a nerve.

Very interesting read. Especially his testimony (last part) before Congress in the 1990’s. Although, he states that not all his solutions for the situation in the 90’s would work now (since we are much further down the debt road), it is very interesting that his warnings have all come true today.

Understanding capital flows is the key to policy. This letter is a clear contradiction to what is being taught in our financial schools and what is being understood by US policy makers.

Casey Research has a great summary on the history of fiat currencies and the USdollar’s similarities to the fallen currencies of the past. The worst part of this situation is that most believe that the dollar can never implode, since it has been “stable” for so long.

So, will a similar fate befall the U.S. dollar? The common denominator that led to the downfall of each currency above was the two big Ds: Debts and Deficits.

With that in mind, consider the following:

Morgan Stanley reported in 2009 that there’s “no historical precedent” for an economy that exceeds a 250% debt-to-GDP ratio without experiencing some sort of financial crisis or high inflation. Our total debt now exceeds GDP by roughly 400%.

Investment legend Marc Faber reports that once a country’s payments on debt exceed 30% of tax revenue, the currency is “done for.” On our current path, analyst Michael Murphy projects we’ll hit that figure by October.

Peter Bernholz, the leading expert on hyperinflation, states unequivocally that “hyperinflation is caused by government budget deficits.” This year’s U.S. budget deficit will end up being $1.5 trillion, an amount never before seen in history.

Since the Federal Reserve’s creation in 1913, the dollar has lost 95% of its purchasing power. Our government leaders clearly don’t know how – or don’t wish – to keep the currency strong.

July 27, 2011

Click here for some great comments on gold from Trader Dan over at Jim Sinclair’s website. Click the link and scroll down to that wonderful chart, we are in a strong trend upward. Do not let the day-to-day noise distract you from the long-term trend we are in.

July 26, 2011

Click here for another example of the TBIF criminals circumventing the rule of law. If no one is prosecuted or bankrupted as a result of this criminal behavior, what makes anyone thing they will stop breaking the law?

Sigma X update from zerohedge. Click here. (zerohedge did some website updates over the weekend. Still working out some bugs. Keep trying the link, if it doesn’t work the first time.)

Be very careful, ladies and gentlemen. The Greek non-bailout, really default, is still taking its toll on the European (including Britain) Banking System.

Sigma X (the shadow stock market) reveals that the European Banks, especially Italy, Spain, and Britain, are still under extreme pressure. They are breaking down because of their exposure to Greek, Spanish, and Italian debt.

This situation has the potential to move right over the pond to the US because of the Money Market Funds exposure to high risk European debt. If it does, the debt ceiling circus will be blamed, not the Greek default, for causing a run on European banking/credit system and thus US Money Market Funds.

We have seen a run on the European banks with the most exposure to the PIIGS debt and the US Money Market Funds for the last several weeks. The Europeans are doing the exact same thing that the US did with AIG and Bear Stearns and the implosion of mortgage-backed derivatives. They are picking and choosing who to bailout and who to let go and pouring a huge amount of cash into the system to keep it going, while investors drain their money from the other side of the system. The likelihood of a major global systemic problem, similar to 2008, developing from this reaction is very high.

It will not be announced. Be prepared.

Update, later on July 25: Italy’s debt is not only affecting exposed European and British banks, but they have cancelled their August bond auction. Click here.